Since 1995, most bank takeovers in Argentina have involved trusts in an effort to facilitate the potentially onerous process, according to a Central Bank source. Clients of failing banks are said to benefit as well. “[The structure] prevents deposits from getting trapped for too long as they might under a normal process of judicial bankruptcy,” said Hernan Gutierrez, head of trust and fiduciary products at ABN Amro Argentina, which has acted as trustee on some of the deals.
The system has been applied to good effect in the case of Citibank’s purchase of Banco Mayo and the divvying up of Banco Israelita de Cordoba for acquisition by several entities, according to the Central Bank source. Under this modus operandi, an acquiring bank (or banks) directly buys the bulk of a bank’s liabilities, namely deposits. Assets, meanwhile, are placed in a trust, which then issues paper purchased by the bank or group of banks. Maturities tend to run four to five years and bear low yields. The trustee is in charge of collecting the payment on the debts. “Particularly when several banks are involved, it makes everything much easier,” the Central Bank source said.